Carlsberg to sell Turk Tuborg
Carlsberg has confirmed that it is in discussion to sell its 95.65 percent stake in Turkish unit Turk Tuborg to Central Bottling Company Group.
In a statement, the company maintained that the Central Bottling Company (CBC), its partner in Romania and Israel, expressed an interest in acquiring Carlsberg’s stake in Turk Tuborg. The brewer has already signed a memorandum of understanding with CBC regarding a possible sale of its stake. CBC is a privately owned group of companies and by its own account is Israel’s largest total beverage company with a combined annual turnover of over USD 500 million. The group has become a significant player in the Israeli economy, ranking 24th among Israel’s largest enterprises in 2006.
In case you wonder why an Israeli company would want to buy a brewery in a predominantly Muslim country like Turkey. Well, for decades, military, strategic and diplomatic cooperation between Turkey and Israel have been accorded high priority by both governments, as they share similar concerns regarding the instabilities in the Middle East. Moreover, Israel hopes to benefit from a massive network of pipelines from Turkey which shall bring it water, electricity, gas and oil.
What all of us have been pondering are Carlsberg’s reasons for selling Turk Tuborg. Could it be that Carlsberg is selling off business units in an effort to finance its purchase of Scottish & Newcastle? Or has the Danish brewer decided to focus on its Carlsberg brand only, thus getting rid of the Tuborg beer brand, which happens to be the number two beer brand in Turkey behind Efes Pilsen with a market share of less than 20 percent?
It was in 2001 only that Carlsberg gained a controlling interest in Turk Tuborg. Previously, the Danish brewer had held a tiny stake in Turk Tuborg that it increased to 50.01 percent in the summer of 2001 by acquiring 47.7 percent of total share capital from Yasar Holding (which retained 15 percent). Later in the year, Carlsberg acquired an additional 21.19 percent in Turk Tuborg from George Soros’s Quantum Fund. It has since bought out Yasar completely.
Turk Tuborg currently controls 16 percent of the Turkish beer market, which also happens to be the largest Tuborg market outside Denmark. That’s down from 21 percent in 2004 and a far cry from the 27 percent market share Carlsberg had set itself as a target for 2008. What makes Carlsberg’s performance in Turkey appear even less favourable is that it has been unable to benefit from the recent surge in beer consumption. The Turkish beer market has grown steadily – alone 20 percent between 2001 and 2005 thanks to a buoyant economy and booming tourism.
There have been many rumours over the years that Carlsberg would exit the market. The reason? Allegedly, the high tax rate. Taxes were raised four times between 2003 and 2005 alone. The last to deny these rumours was Carlsberg’s former CEO Nils S. Andersen in 2005.
